Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

S&P cuts Russia's rating to junk, Moody's issues junk warning

Stock Markets Feb 25, 2022 10:50PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Signage is seen outside the Moody's Corporation headquarters in Manhattan, New York, U.S., November 12, 2021. REUTERS/Andrew Kelly

(Reuters) -Russia's invasion of Ukraine triggered a flurry of credit rating moves on Friday, with S&P lowering Russia's rating to 'junk' status, Moody's (NYSE:MCO) putting it on review for a downgrade to junk, and S&P and Fitch swiftly cutting Ukraine on default worries.

Both countries' financial markets have unsurprisingly been thrown into turmoil by this week's events, which rank as the biggest military attack in Europe since World War Two, bringing stiff Western sanctions on Moscow.

S&P lowered Russia's long-term foreign currency credit rating to 'BB+' from 'BBB-', and warned it could lower ratings further, after getting more clarity on the macroeconomic repercussions of the sanctions.

"In our view, the sanctions announced to date could carry significant negative implications for the Russian banking sector's ability to act as a financial intermediary for international trade, S&P said.

It also cut Ukraine's rating to 'B-' from 'B'.

Russia now has an "investment grade" rating of Baa3 from Moody's and an equivalent BBB- from Fitch, due to one of the lowest debt levels in the world at just 20% of GDP, and nearly $650 billion of currency reserves.

A downgrade, however, would lower that rating to the riskier "junk" or sub-investment grade category.

"The decision to place the ratings on review for downgrade reflects the negative credit implications for Russia's credit profile from the additional and more severe sanctions being imposed," Moody's said in a statement.

Sovereign rating reviews can take months but this time are likely to be quicker.

Moody's said its decision would factor in the scale of the conflict and the severity of additional Western sanctions, which have already hit some of Russia's top banks, military exports and members of President Vladimir Putin's inner circle.

It added it would also weigh the degree to which Russia's substantial currency reserves are able to mitigate the disruption stemming from the new sanctions and lengthy conflict.

"Moody's will look to conclude the review when these credit implications become more clear, particularly when the impact of further sanctions takes shape in the coming days or weeks," it said.

Moody's also put Ukraine's already-junk "B3" rating on review for a downgrade.

Fitch did not wait, however, and moved immediately to slash its Ukraine rating by a whole three notches to "CCC" from "B".

It explained, "There is a high likelihood of an extended period of political instability, with regime change a likely objective of President Putin, creating heightened policy uncertainty and potentially also undermining the willingness of Ukraine to repay debt."

Moody's had also warned a heavy conflict could leave Kyiv struggling to make debt payments.

Scope, a smaller European rating agency, has estimated Ukrainian government debt could jump above 90% of GDP by 2024 from about 50% now while S&P Global (NYSE:SPGI) also warned on Friday of a spate of downgrades as a result of the war..

The International Monetary Fund is exploring all options to aid Ukraine with further financial support, said its head, Kristalina Georgieva.

Russia's central bank has beefed up its banking sector with billions in additional foreign exchange and rouble liquidity, while the government has separately pledged full-scale support to sanctions-hit companies.

It is not the first time Russia is being cut to junk. Moody’s and S&P both took similar steps in early 2015 after the annexation of Crimea and plunging oil prices caused a rouble currency crisis.

There are "serious concerns" around Russia's ability to manage the disruptive impact of new sanctions on its economy, public finances and financial system, Moody's said on Friday.

S&P cuts Russia's rating to junk, Moody's issues junk warning
 

Related Articles

Airbnb makes ban on parties permanent
Airbnb makes ban on parties permanent By Reuters - Jun 28, 2022

By Gigi Zamora (Reuters) - Airbnb Inc said on Tuesday it will make permanent its ban on parties in homes listed on its platform after seeing a sharp drop in reports of...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
Johnny Crash
Johnny Crash Feb 26, 2022 3:22AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Russia lives off oil and gas, the gas price increased 50% explain me how this would bankrupt Russia?
Johnnie NotEnglish
Johnnie NotEnglish Feb 26, 2022 1:01AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I doubt the folks Russia is going to be doing businesses with in the coming year will give two shakes of a rat's tail what Moody's says about Russia's credit rating...
Kapil Baldawa
Kapil Baldawa Feb 25, 2022 8:32PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
And the country which should be first downgraded is US.. way too much printing
LI SH
LI SH Feb 25, 2022 8:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Common, Putin can care less
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email